From PRINT EDITION MicroCap Review Fall 2018 Issue

Wednesday, November 28, 2018

It’s no big secret that until very recently, it has been a rather tough few years for the oil industry and, as a result, tough on companies associated with the industry. This is especially true for microcap companies in the junior oil sector that were fighting to stay between the lines in an environment of high costs and low returns that resulted from the oil price downturn of 2014 to 2017. Well, it appears those days are in the rearview mirror, as oil hovers in the $70’s and many predicting it to go up from there. That’s great news if you were one of the few microcaps savvy enough to manage your way through the traffic and are now positioned to take advantage of the open road left by those that were forced to drive off a cliff…

Jericho Oil Corporation is, in fact, one of the success stories now speeding down the highway. The company, with operational headquarters in Tulsa, Oklahoma, is a well-capitalized junior E&P (Exploration & Production) with an experienced Team that has a recognized track record for success in the area, and an established strategy of buying distressed and undercapitalized assets in proven plays with a focus on domestic, liquids-rich unconventional resource plays, primarily in Oklahoma. Jericho’s core business objective is driving long-term shareholder value through the growth of oil and gas production, cash flow and oil-reserves. As such, the company has assembled an enviable 55,000 acre position across the state of Oklahoma at low-cost entry with significant current production value.

Jericho is unique among juniors as it had strong financial backing during the oil downturn which enabled it to acquire high quality assets at the bottom of the market and the height of distress. The cash to buy came from a handful of world-class, long-term investors. The Breen Family (Ed Breen is CEO of the chemical and agricultural giant DowDuPont) and the Hegna Family are two of the company’s largest shareholders, and they are joined by several other notable families who have backed Jericho, even when oil was sub-$30 a barrel.

Within those 55,000 acres, Jericho, along with its private joint venture partner/family office, owns and operates three high-quality oil and gas plays in Oklahoma. And within those three plays, Jericho has managed to do something many companies were, and still are, simply unable to achieve. Something many companies, both large and small would love the opportunity to do. A company changer! Wait for it… Through years of hard work, diligence, relationship building, relentless Geological/Engineering/Land efforts, and finally, maybe a little bit of luck, microcap Jericho has managed to acquire an interest in ~16,000 net acres (almost all held by production) in the prized Anadarko Basin STACK Play. Yup! That’s it! Jericho managed to become a “player” in the STACK! It’s kind of a big deal. And with each passing day, as their much larger neighboring oil companies release and upgrade well results, work their own geology/engineering/land, and continue to snatch up surrounding STACK acreage at prices 3..4..5 times what Jericho paid, the big deal for Jericho is getting bigger… much bigger.

“We believe the value is all about understanding and delivering best-in-class results in a particular opportunity within a particular play. In our world, the ability to find oil gets harder and harder every year. As such, you want to be aligned with a team that knows an asset, knows a region, and knows how to develop the hydrocarbons in that area. At Jericho, that's exactly what we’ve built: a team geared around developing the stack, a team that understands, lives, and has breathed Oklahoma oil and gas development for the last 40 years. That local knowledge, that rock knowledge, that geology knowledge, and that development experience translates very, very well into successful after successful development programs.” Brian Williamson, CEO of Jericho Oil

Large E&Ps like Continental Resources, Devon Energy, Marathon Oil, Newfield Exploration, Chesapeake Energy and Jim Hackett’s recently-listed Alta Mesa Resources collectively hold over ~1 million acres in the STACK and have made it their core focus. What do they know that Jericho knew as well? It has to do with the superior well results now able to be accessed from “stacked-pay” formations. The STACK boasts top-tier well economics similar to the Permian which translate into very low breakeven prices near $30 per barrel.

“While the Permian Basin has grabbed the attention of oil companies and their investors in recent years… Some drillers are finding that the STACK shale play in Oklahoma is just as good, if not better, than the vaunted Permian. That's why they spent billions of dollars to scoop up land in the region over the past few years, which is starting to pay big dividends by fueling remarkable production growth.” – The Motley Fool (Dec. 13, 2017)

How about a little background… One of the lowest cost oil and gas plays in North America is the Oklahoma STACK. The ‘STACK,’ as it is affectionately known, is an acronym describing both its location and formation. Location - Sooner Trend Anadarko Basin Canadian and Kingfisher County. Formation - The play has multiple, “stacks” of productive formations that are present in the area. The STACK is a prolific hydrocarbon system with high oil content, multiple horizontal target horizons (~700 feet thick), extensive production history and historically high drilling success rates.

The STACK fields were originally developed by the majors (companies like Exxon, Texaco and Shell) and were drilled vertically. The recent introduction of horizontal drilling and hydraulic fracturing has reinvigorated the play, and billions of dollars of investment have been directed into the STACK basin because of the repeatable stacked, multi-zone, successful drilling and development across the play.

And Jericho is no exception. As oil moved comfortably into the $60s/70s this year, the company transitioned its focus from growth through acquisitions to growth through the drill bit.

Jericho recently participated in the successful drilling and completion of two test horizontal STACK wells, partnered with best-in-class private operators. The first well (Wardroom) achieved a peak 24-hr rate of 957 BOE, with an IP30 (Initial Production over 30 Days) of 770 BOE per day and was amongst the highest of any well to-date targeting the Meramec formation in the northern STACK on a per 1,000 lateral foot basis.

Early results from the second well (Swordspear), which targeted the Osage formation, after 30-days on an electrical submersible pump, were reported on July 25, 2018. As of that date, the most recent daily production reading was of +500 BOE – and the well had still not yet reached peak IP. (See Figure 4)

There are several catalysts ahead for shareholders as the coming months look to be filled with positive activity, pushing the company onward, upward and continuing the metaphor of heading down that highway of success. Jericho has plans for at least three new horizontal STACK wells in the second half of 2018 along with additional “tuck-in” acquisitions contiguous to its current STACK acreage increasing Jericho’s already, envious position.

Looking out even further, Jericho’s story seems primed to pick up even more speed. Each STACK well at $60 oil delivers ~$3.5 million of PV10 value (PV10 is the current value of approximated oil and gas revenues in the future, less anticipated expenses, discounted yearly at 10%). Jericho’s STACK JV currently owns ~200 well locations, so the upside for Jericho and its shareholders appears to be enormous.

With the inevitable winding road aside, Jericho is a world-class team, determined to continue growing and succeeding, dedicated to the craft, with a detail to timing. As such, Jericho Oil Corporation appears to have their top down and are motoring in the right direction…

Experienced Mid-Con Leadership Team

Brian Williamson, CEO

Mr. Williamson has been a part of the energy industry since 1995. Mr. Williamson, in his role as CEO, is responsible for the overall vision, direction and corporate strategy of Jericho. Day to day, he spends his time working with Jericho’s leadership team sourcing, evaluating and developing the company’s oil and gas assets and capital market activities. Mr. Williamson began his career at Arthur Andersen as part of its Tax and Business Advisory Services Practice. While at Arthur Andersen, he worked with Fortune 500 and FTSE 100 companies and private firms on evaluating investment opportunities and conducting extensive research on corporate planning and due diligence on industry transactions. Mr. Williamson also oversaw the creation, trading and risk management of energy and energy related trading products in various world markets. From 2006 until 2012, Mr. Williamson managed the private equity platform for a New York based financial institution. Mr. Williamson earned a B.S. in Accounting from LaSalle University and a J.D. from Widener University School of Law, where he served as law review editor and was a national moot court semi-finalist. Mr. Williamson is a Certified Public Accountant (inactive).

Ben Holman, CFO

Mr. Holman, based in Tulsa, Oklahoma, has more than 17 years’ experience in accounting and business administration in the oil and gas industry, including senior positions at Apco Oil and Gas International Inc., a former subsidiary of The Williams Companies and WPX Energy. He has been working with Jericho at its Tulsa operational headquarters since November 2017. Mr. Holman is a CPA, with a MAcc, B.S. and BSBA, all from the University of Tulsa.

Dennis Webb, Director of Engineering

Mr. Webb is a Petroleum Engineer with 40+ years of experience primarily working the Mid-Continent and Permian Basins. His experience spans everything from waterflooding to full field development and corporate management. He has also spent time in the industry in Kuwait as well as in Yemen as Production Superintendent for Hunt Oil. He has spent the last eight years with Nadel and Gussman LLC where he was responsible for the horizontal Mississippi Lime drilling program which involved 15 horizontal wells including the first horizontal Mississippi Lime wells drilled in Osage County, Okla. Mr. Webb has a Bachelor of Science in Computer Engineering from the University of Oklahoma, is a 25 year member of the Society of Petroleum Engineers, and has been a registered professional engineer for 37 years.

Shane Matson, Director of Geology

Mr. Matson joined the Jericho management team in 2016 and serves as Director of Geology. He has studied the outcrops and subsurface geology of the Mid-Continent region for 20 years and brings over a decade of work as a Petroleum Geoscientist with focus specifically on Jericho’s current area of focus and brings a history integrating highly technical attribute analyses of 3D seismic volumes into modern exploration and reservoir development workflow. Through his work with Ceja Corporation, Spyglass Energy Group and Mid-States Petroleum Matson has been at the forefront in pioneering the horizontal development of Mississippian reservoirs. Mr. Matson graduated with a Bachelor of Science and Masters of Science degrees from the University of Arkansas, Fayetteville where he serves as an honorary member of the External Advisory Board to the Department of Geosciences. He is a member of the American Association of Petroleum Geologists, Tulsa Geological Society, Ft. Smith Geological Society, and the Oklahoma Well Log Library. Mr. Matson is a two-time recipient of the AAPG Mid-Continent Section A.I. Levorson Memorial Award. The award recognizes the best paper presented at the MCS AAPG Section meeting, with particular emphasis on creative thinking towards new ideas in exploration. He has presented work and ideas on the Mississippian reservoirs of the Mid-Continent at the AAPG Playmakers Forum and AAPG Discovery Thinking Forum.

Bill Harwell, Director of Land

Mr. Harwell brings an extensive background in all aspects of petroleum landman management, operations and administration. Mr. Harwell has spent much of his career in the Mid-Continent region. With over 30 years’ experience in land functions, Bill has successfully led land teams as part of Williams Energy as well as managed the land function for Private Equity sponsored energy focused groups. Bill’s experiences include end to end exposure to all aspects of the petroleum land business including managing and overseeing acquisitions, inspections, divestures, right-of-way projects. Mr. Harwell has given expert testimony at The Oklahoma Corporate Commission in over 50 hearings. He is currently a member of the International Right of Way Association, Tulsa Association of Petroleum Landmen and Tulsa Pipe Liners Club.